DOJ: Cyber extortionists targeting hedge funds

FILE-In this Wednesday, Dec. 24, 2014 file photo, a computer screen shows Sony Pictures' film, "The Interview" available for rental on YouTube Movies, in Los Angeles. Sony appears to have a win-win with "The Interview." Not only did the studio score a moral victory by releasing the film in the face of hacker threats, the movie made at least $15 million from more than 2 million digital rentals and purchases in its first four days. (AP Photo/Richard Vogel, File) ORG XMIT: CAET237(Photo: Richard Vogel, AP)

LAS VEGAS – The government is working with "several" hedge funds that have been victims of cyber extortionists, said John Carlin, head of the Justice Department's National Security Division.

Carlin made the comments Friday at the SALT hedge fund conference in Las Vegas, where he came to warn the crowd, made up of hedge fund professionals, that cyber criminals are out to steal their information, their corporate secrets and their money.

"We are seeing nation-state action – from Russian, China, Iran and North Korea -- target your companies and what you have, day in and day out, to use your information against you," Carlin warned the Wall Street crowd.

Other perpetrators include "jihadist" terrorists and criminal groups, Carlin said at the conference, which attracts hedge fund stars like Jim Chanos and Dan Loeb, as well as other big names like former U.S. Secretary of State Condoleezza Rice.

Increasingly, cyber crooks are working together, Carlin said, to the conference-goers gathered at the opulent Bellagio Hotel and Casino.

"One group develops it (the software) and another criminal group rents the software to encrypt all of your file and then say, "Give us $1 million if you want to see your information again," Carlin warned.

"We have already seen this happen with hedge funds," Carlin said, adding that DOJ is working with several hedge funds that have been victims of cyber blackmail.

Carlin encouraged the Wall Street crowd to reach out to DOJ, which includes the FBI, if they are ever targeted. And he sought to assuage concerns that giving the government access to their corporate secrets might backfire.

"When you come in and talk to the FBI and prosecutors, you will not leave the office in handcuffs," Carlin said to light laughter.

In recent years, several large hedge funds have been taken down due to a massive insider-trading crackdown headed by the New York FBI and Manhattan U.S. Attorney Preet Bharara. Ironically, before Carlin took the stage, a lawyer had just warned the the crowd against talking to the government.

Marc Powers of BakerHostetler had just warned the monied crowd against talking to the Securities and Exchange Commission if they ever come calling. "And that goes double for the FBI," he said.

Companies, including investment firms, are also worried about the bad publicity that often comes with cyber attacks, including accusations from customers and shareholders that attacked companies didn't do enough to protect themselves.

Carlin said the government is seeking to change that concern, in part, by stressing that the victim is not the blame.

"The bad guy is not the company that has been breached. The bad guy is the nation state or the perpetrator of the breach," he said. "We take very very seriously the position that we shouldn't victimize you," Carlin said.

Carlin used the Sony hack as an example of how working with government officials to find the perpetrator can help. In that case, in which Sony's computers were hacked and embarrassing emails were leaked, the public was blaming the company until the FBI said North Korea was behind the attack. Sony was about to release a snarky movie about North Korea's leader, Kim Jong Un, government officials said.

"This isn't something that just happened to Sony. This could happen to anyone and more than 90% of companies are vulnerable to this kind of attack," Carlin said.

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